previously that in the political/legal forces, you can simply use a search engine and ask it to give you the major pieces of existing legislation that impact the banking industry. But we also need to analyze how the new administration’s policies will affect the industry. I went to a search engine and asked how the new administration’s proposed policies might influence the banking industry. It returned many Web articles. I found a succinct piece at www.thebanker.com titled – How Trump’s deregulation drive could impact banks. Again, you have to think these things through but I’m giving you examples of what type of information is out there that might help spur your thinking. Don’t get too lost in the banking industry at this stage. We are not analyzing the banking industry yet. That will come in step two when we analyze the operating environment using Porter’s Five Forces model. But we can’t do that until we fully analyze the forces in the broad environment (i.e., socio-cultural forces, economic forces, political/legal forces, technological forces). The analysis of the broad environment is of the environment itself – to determine how conducive the environment will be for business. So, analyze these four forces from that basis. At this stage, we simply keep the industry in the bank of our minds so that we can specifically identify the opportunities and threats that will be coming for our industry, and others, from the four broad environmental forces. When you analyze a force (e.g., economic forces), the data is the data, no matter the industry. So, give me the past eight quarters for measures like GDP, CPI, PPI, PCE, unemployment rate, interest rates, exchange rates, consumer sentiment, etc. Then give me your forecast of the eight quarters into the future. Once you do that, though, you know what your industry is, so the threats and opportunities that you identify will be those that you see as being impactful for your industry. And these will be industry specific. For example, if your forecast says that interest rates will rise over the next two years, that would be a threat if you were in the automobile industry. But if you were in the semiconductor industry, the rising rate environment would be noted but it would not be identified as a threat, as that industry isn’t interest rate sensitive. So, even though we are analyzing the broad forces broadly, there will undoubtedly be some overlap when you identify the opportunities and threats. And remain clam. I told you this was hard to do. There is no such thing as a perfect analysis of the broad environment. This is complex stuff, and its why major firms have strategy teams working diligently in what they often call “war rooms” to analyze these forces. But no two organizations likely have the exact same analysis because their forecasts are likely somewhat different. And the opportunities and threats they see coming will also likely differ to some extent. But let me share with you an example of what I though was a good effort at analyzing the broad environment from my winter mini course. For that course, I selected the home building industry, as I specifically wanted them to see the threat of a higher for longer interest rate environment coming from the economic forces. But don’t forget to forecast in the other forces as well. For example, when I analyze the political/legal forces in the broad environment currently, I see deregulation coming. And my forecast in this area suggest that deregulation is coming to most all industries. But, since I know that my industry is the banking industry, I can confidently suggest that deregulation will be an opportunity, as there will be significant changes to bank capital requirements (see Basal III endgame).
Example.. But our is about banking